A holiday weekend is always a time to imagine. Not burdened with the rigors of the daily grind, the mind is free to roam like a gentle cow on a wide open pasture. I am proud to say that, for the first time in 10 years, I enjoyed a brief getaway on Labor Day weekend, a scenic camping trip tucked in a dirty Jersey wooded area.
Never truly unplugged, I was up at 6 a.m. on Saturday reading the chorus of negative market forecasts in Barron's and preparing for the week ahead. Here are some thoughts from the park bench.
Back to school: I have grown scared of making long recommendations in the retail sector over the last two years. There, I said it: A hot-shot stock analyst is afraid of suggesting that people buy consumer-discretionary names aside from Chipotle (CMG) and Starbucks (SBUX) -- and even J.C. Penney (JCP)! It hasn't been without well-defined, wonderful reasons. I believe we are in the second inning of a seven-inning game of margin compression for a wide swath of retailers, caused by a wicked concoction of big-time investments in tech infrastructure, competitive pricing, shipping promotions and rising physical-store rents.
Those long-term thoughts aside, this week's limited quantity of same-store sales reports -- which will encompass the back-to-school season and pre-Labor Day buying -- could potentially be better than expected. That could potentially be due to new trends in kids' apparel, robust athleticwear demand and typical basics buying. Should same-store sales come in hotter than what has been anticipated by the market, look for the news to trigger favorable sell-side commentary on the earnings power for retailers during the approaching holiday season.
Apple iPhone/iBand: News broke over the weekend that Apple (AAPL) will announce a deal for a mobile wallet with Visa (V) and MasterCard (MA) on Sept. 9. This is bad news for eBay's (EBAY) PayPal division, and it is going to be a powerful driver of sales and profits for countless companies.
Why? Any new software and hardware offering from Apple is likely to completely remove one's self-awareness of cash. Some will say this has been under way as a result of numerous mobile wallet apps and cash-sharing platforms. Heck, I have watched the splurging firsthand at Starbucks due to its effortless mobile payment app.
However, whatever Apple unveils will have the potential to greatly improve the sales at companies from Wal-Mart (WMT) to General Mills (GSI) to Burger King (BKW). It removes the physical barrier to spending: Folks will no longer have to reach into a physical wallet, an act that gives a person time to reconsider a purchase. That is a long-term win -- that is, after companies invest in the infrastructure to support new handheld technology.
Best Buy: I received a few inquiries into what I am expecting to hear from Best Buy (BBY) when it reports. Let me be a bit more precise, without getting in trouble. First, I expect cutthroat pricing by Samsung on all products within the month as Apple comes to market with its new product suite. Second, I anticipate new initiatives in Best Buy's Geek Squad service, which I have viewed as an untapped opportunity -- though not a near-term earnings needle mover -- for the company.
Third, I believe the store will offer new devices and store presentations related to the connected home. More important, the company is likely to initiate intimate customer service on the connected home -- because, let's face it, who the heck knows why they need smart locks and smart thermostats?